How People Get Rich Now • Hacker News Board

Re: How People Get Rich Now

#501

Post by coldtea » Mon, Apr 12, 2021, 7:14 PM UTC

aerosmile wrote: post #457

peter422 wrote: post #446

Earlier quoted context omitted.

Why can’t employee compensation also come from diluting Wall Street? Why do they vast majority of those benefits go to top executives?

The benefits should go to whoever is responsible for the success of the company. This obviously opens up a political can of worms: the Left will say the CEO can't get anything done without the workers, the Right will say the workers can't get organized without the CEO (eg: what was Apple doing before Steve Jobs came back?). The workers can obviously leave and seek employment elsewhere. So can the CEO. For better or w…

>The benefits should go to whoever is responsible for the success of the company. This obviously opens up a political can of worms: the Left will say the CEO can't get anything done without the workers, the Right will say the workers can't get organized without the CEO

And a pragmatism can say that all kinds of CEOs have driven companies to the ground, reducing their valuation even 1/10 what it was, and destroying their market share, and walked away just fine, with golden parachutes and even bonuses...

CEOs get more because CEOs get to determine what they get (and the board members and execs rub each other's back when it comes to their collective advantages).

It has little to do with performance and "whoever is responsible for the success of the company".

Re: How People Get Rich Now

#502

Post by lanstin » Mon, Apr 12, 2021, 7:15 PM UTC

hospadar wrote: post #63

While I think this is in general interesting, a couple things stand out to me: > And there's a reason why: these are mostly companies that win by having better technology, rather than just a CEO who's really driven and good at making deals. Really? Always? Are we sure that some companies [which are funded by giants like softbank and have names that rhyme with schmuber] don't [at least] sometimes win because of massiv…

Maybe things have shifted, but the Jobs bio and the Gates bio makes one think that in the technology land rush, "better technology" looses to "driven and good at making deals." Perhaps the "worse is better" feature of technological culture explains it, but the Woz and Unix did not win; Jobs and Microsoft won. (Perhaps free software will win in the end, but no guarantees in history.)

In fact, if I had to explain the change in technology over my lifetime it is that the people who understand technology and love elegance and efficiency are being pushed out by the people that want to be wealthy and get in on good deals.

Re: How People Get Rich Now

#503

Post by jefftk » Mon, Apr 12, 2021, 7:15 PM UTC

dcolkitt wrote: post #73

> It's easier now to start and grow a company than it has ever been. That means more people start them, that those who do get better terms from investors, and that the resulting companies become more valuable. This may be a quibble, because I think Paul Graham really means a certain type of high-growth startup in mind when he says "start a company". But the rate of new business formation in the US has fallen off a cl…

[3] When I say people are starting more companies, I mean the type of company meant to grow very big. There has actually been a decrease in the last couple decades in the overall number of new companies. But the vast majority of companies are small retail and service businesses. So what the statistics about the decreasing number of new businesses mean is that people are starting fewer shoe stores and barber shops.

People sometimes get confused when they see a graph labelled "startups" that's going down, because there are two senses of the word "startup": (1) the founding of a company, and (2) a particular type of company designed to grow big fast. The statistics mean startup in sense (1), not sense (2).

Re: How People Get Rich Now

#504

Post by greatgib » Mon, Apr 12, 2021, 7:15 PM UTC

missedthecue wrote: post #433

greatgib wrote: post #411

Strangely, an explanation for the increased number of wealths coming from new, tech companies and investments that is ignored in his post is the disturbing fact it was taken from the average employee cut of the profits. See this: https://www.theguardian.com/business/2018/aug/16/ceo-versus-... I quote: "The 2017 CEO-to-worker compensation ratio of 312-to-1 was far greater than the 20-to-1 ratio in 1965, and more than…

I hate this comparison. Stock based compensation didn't exist in 1965. It's an oranges to apples comparison. CEO salaries today are still about 20-1, depending on the business. For instance: - Doug McMillon of Walmart makes $1.2 million in salary. - James Quincy of Coca-Cola makes $1.5 million in salary. - JPMorgan's CEO Jamie Dimon has a $1.5 million salary. - Sundar Pichai of Google makes $2 million in salary. You…

First, when PG compare wealth of rich persons, he does not just compare salaries but the total wealth that come from the total of incomes.

Second, there is something not to forget about the stocks:

It is a "right" to the proportional part of all the future financial results of the company.

.

So, let's forget about inflation and consider equivalent dollars:

Imagine you have a 30 employees company, that will generate 1000$ of income. Of these 1000$, there is a 50% margin, so it remains 500$ of benefit.

.

In 1965:

- Boss will have a salary of 200$

- 30 employees total wages of 300$ (so 10$ per person)

- Net result of 0$ (total of stocks, going to the boss anyway)

.

In 2017, same company and conditions:

- Boss will have a salary of 50$

- 30 employees total wages of 19,23$ (so 0,64$ per person)

- Net result of 430,77$

The net result belongs to Boss + other shareholders.

-> boss get: 150$

-> other shareholders get: 280,77$

(So in result 200$ for the boss, 0,64$ per employee, 312-1 ratio)

.

Some people will say that the stocks value, based on valuation, does not correspond to 1 year of revenue. So, for example a 100$ stocks might correspond to an expectation of 10 years of 10$ benefit.

But, on the previous article the 312-1 ratio corresponds to a year compensation, that is repeated every year. So it means that as a boss, you will also get new stocks or bigger capital for your stock every year to have this ratio maintained.

Re: How People Get Rich Now

#505

Post by giantrobot » Mon, Apr 12, 2021, 7:16 PM UTC

globular-toast wrote: post #174

Taek wrote: post #40

Earlier quoted context omitted.

The games we've played with money have pushed valuations to a point of being nearly meaningless. There are people who own a billion dollars of stock/crypto, and then there are people who own multiple yachts, multiple mansions, sports teams, factories, etc. The thing that bothers me the most about paper wealth is that not all of it can be exited. The economy may say that there are 500 new billionaires, but if all 500…

Exactly. At the end of the day there is only so much stuff to go around and we're pretty much at the limit of what people actually want. If a billionaire wakes up twice as rich tomorrow is he immediately going to buy a bigger mansion? Another car? Another yacht? More expensive food? Realistically he's unlikely to really want anything else. Billionaires have essentially infinite wealth. They can have whatever they wan…

A billionaire (or a sufficiently wealthy millionaire), along with their family, has practically unlimited agency. You don't. Their wealth is also self perpetuating.

A billionaire can spend 1% of their wealth hiring well compensated professionals to manage their wealth and keep it growing. Just the fact a billionaire has their wealth means they have access to influence and opportunities you will never have.

Even someone with a mere hundred million in wealth only needs a 1% yearly return to have a million dollars a year. Even that paltry amount would allow them to live better than anyone you or I know.

Re: How People Get Rich Now

#506

Post by Balgair » Mon, Apr 12, 2021, 7:17 PM UTC

benzor wrote: post #488

heylook wrote: post #458

Earlier quoted context omitted.

> - Large unicorn startups that are perpetual money losers continue to operate only because they are effectively subsidized by regular capital raises. Look no further than all the Silicon Valley darlings such as Uber, Netflix, AirBnb, Tesla, and so on. All of them would cease to exist without continued capital injection from secondary share offerings or VC raises You should look up the financial statements of the com…

Apologies for some hastily chosen examples. I think the point still stands if you consider the following companies: WeWork, Lyft, Snapchat, Pinterest, Dropbox, Slack, Casper, Lime, Peloton, Beyond Meat, Wayfair, Zillow. More generally speaking, take a look at Goldman Sachs' Non-Profitable Technology Index: https://pbs.twimg.com/media/EsRVCiMXIAE7xlA.png

Are the fake-meat companies tech companies? I thought they are more like contract manufacturers, brewers, or other industrial foodstuffs.

No doubts on the access to cheap debt, though.

Re: How People Get Rich Now

#507

Post by criddell » Mon, Apr 12, 2021, 7:17 PM UTC

troygoode wrote: post #337

dcolkitt wrote: post #73

> It's easier now to start and grow a company than it has ever been. That means more people start them, that those who do get better terms from investors, and that the resulting companies become more valuable. This may be a quibble, because I think Paul Graham really means a certain type of high-growth startup in mind when he says "start a company". But the rate of new business formation in the US has fallen off a cl…

He specifically addresses this in footnote [3].

And he tries to spin it:

> So what the statistics about the decreasing number of new businesses mean is that people are starting fewer shoe stores and barber shops.

He might like to point out that the decrease is disproportionately higher among those types of businesses that are part of a thriving community, but the reality is the overall number of businesses being started has gone down.

Re: How People Get Rich Now

#508

Post by daemin » Mon, Apr 12, 2021, 7:18 PM UTC

missedthecue wrote: post #452

peter422 wrote: post #446

Earlier quoted context omitted.

Why can’t employee compensation also come from diluting Wall Street? Why do they vast majority of those benefits go to top executives?

Performance and incentive alignment. John Doe stacking pallets at the Coca Cola factory really won't produce much better top or bottom line results for the business if you offer him a stock bonus. His forklift only drives so fast, and he plays a very minute part in the direction of the business. The CEO on the other hand can have a huge impact, and it's why shareholders choose and vote on certain incentives and bonus…

But why not give them stock options as well? Why shouldn't all the people employed by the company share in its success? Even if it's the CEO's decision which determines the direction the company will go, it's all the people implementing that plan that actually cause the company to make money and succeed.

Re: How People Get Rich Now

#509

Post by pdonis » Mon, Apr 12, 2021, 7:19 PM UTC

alpha_squared wrote: post #465

missedthecue wrote: post #452

Earlier quoted context omitted.

Performance and incentive alignment. John Doe stacking pallets at the Coca Cola factory really won't produce much better top or bottom line results for the business if you offer him a stock bonus. His forklift only drives so fast, and he plays a very minute part in the direction of the business. The CEO on the other hand can have a huge impact, and it's why shareholders choose and vote on certain incentives and bonus…

> John Doe stacking pallets at the Coca Cola factory really won't produce much better top or bottom line results for the business if you offer him a stock bonus. His forklift only drives so fast. A counter-perspective would be that John Doe becomes incentivized to improve efficiency and innovate in the process. People are not machines or primitive animals. Humans are capable of creative problem-solving. Note: stock o…

> A counter-perspective would be that John Doe becomes incentivized to improve efficiency and innovate in the process.

But the best-case percentage improvement in the overall company bottom line due to his innovations as a fork lift driver is still very, very small. To make it bigger, John Doe needs to stop being a fork lift driver and move to some other position with more leverage. And a person who really does have the ability to "improve efficiency and innovate" enough to make investors notice is probably better off quitting their current job and starting a startup.

> stock options are not stocks. You're not given a share in the company, you're given the opportunity to invest in the company. You have to put money in to _potentially_ get money back.

My experience is that virtually all employees of large corporations who get stock options exercise them for direct cash, meaning they never actually own the stock; they "buy" it and then "sell" it immediately and take the cash (in practice whatever financial institution is running the company's stock option program does all this automatically and just sends the employee a check and a 1099 form for when they file their taxes). So virtually no employees actually take the opportunity to invest in the company. They just take the additional immediate income.

Re: How People Get Rich Now

#510

Post by sithlord » Mon, Apr 12, 2021, 7:20 PM UTC

benzor wrote: post #324

There's some nuggets of truth in here, but I am disappointed that this article sidesteps what I feel is the most important reason for startup success in 2020: easy and abundant access to cheap capital. - Interest rates are at all time lows, borrowing is cheap - The Fed's balance sheet is at an all-time high. The economy is flush with cash, particularly the investor / VC class - This excess cash creates an (arguably a…

These companies could easily cut their marketing budgets in half and basically be profitable. They could also cut their R&D and focus only on their main money streams and be profitable. There is just no reason to be profitable, when you can raise more money.